A blog by Joel Barolsky of Barolsky Advisors

Archive for September, 2015|Monthly archive page

Cultural fit, or do you mean no misfit?

In Articles, Commentary on 25 September 2015 at 7:05 am

I’d love a dollar for every managing partner that says they want to recruit a new person, or acquire a new practice, that has the right cultural fit. What does that really mean? When push come to shove, in most firms cultural fit is a proxy for “no dickheads” (to quote a client or two). It means a person like us who won’t disrupt the status quo. It’s not really cultural fit, but rather no cultural misfit.

I think viewing cultural fit in this way is a missed opportunity and doing a disservice to your firm’s strategic potential.

Your culture club

salons_coffee_art_contest_our_daily_shotsYour firm’s culture club can be divided into three groups: Misfits, Colleagues and Catalysts. Misfits are unmanageable non-team players who have been retained either because they’re major rainmakers and/or the firm’s leadership hasn’t had the guts to have the hard conversation. Misfits are sometimes referred to as cultural terrorists.

Colleagues are those that fit in and play by the tacit and explicit rules. They are solid performers and contributors within the current cultural norms.

Catalyst are those that will help create the firm you want to become. They’re the agents of change that enable the firm to adapt to new client demands and competitive realities. Whilst Catalysts are collegiate and respectful of others, they are disruptive in that they act as symbols and sources of energy for new ways to operate and compete.

Misfits and Catalysts are sometimes confused in they both discordant, and therefore risky and confronting. The critical difference is that Catalysts are willing to put the firm first, their motivation is less about ego and personal power.

During recruitment, most Misfits try their best to present well, however, one can try discern their true colours via a combination of personality profiling, personal references and behavioural-event interviewing.

Strategic potential

A firm with 100% Colleagues, and therefore no Catalysts, will feel like a cosy club but is likely lose ground to competitors over time. In a turbulent environment if you’re not adapting at the same speed or faster than the market you’re going backwards. Catalysts help you adapt but with a level of control and discipline. They enable the firm’s culture to move beyond nice and to develop real cultural differentiation.

Map your firm

When you are about to do your next round of partner appointments or a senior lateral hire, think less about general cultural fit and more about whether you want a Colleague or a Catalyst?

Another worthwhile exercise is to map your current partner cohort into Misfits, Colleagues and Catalysts. It’s probably time to bite the bullet (and load it at the same time!) and address your cultural terrorists. In asking firms if they’ve had any regrets in letting their Misfits go, the universal response has been, “just one – we should have done it ages ago”.

The really tough question is whether you have the right number and type of Catalysts that will create the firm of the future?

Photo source: http://salon.com

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10 reasons why culture eats strategy for breakfast

In Articles, Commentary on 4 September 2015 at 10:53 am

Over the past 12 months I have worked with three professional service firms that have outperformed their peers. Despite operating in flat markets they have consistently recorded double-digit revenue and profit growth. This success has come without superstar rainmakers, with undistinguished brands and with no fancy shmancy disruptive business models.

So what is it that has made them so successful?

To me it’s cultural differentiation. Not market differentiation, but an internal culture that creates value, both internally and externally. It’s a culture that’s eating strategy for breakfast, as famously proclaimed by Peter Drucker.

Based on these three case studies and other research, I posit that there are ten areas where cultural differentiation really counts.

#1 Productive politics

img90In firms with highly politicised cultures, enormous energy is expended addressing internal matters like performance measurement (i.e. who takes credit), partner remuneration, client ‘ownership’ and resource hoarding/sharing. Power struggles and infighting between divisions, office locations, teams, practices and individual partners distract from value creating time with clients and staff. A managing partner of leading law firm once revealed to me that he spent around 40% of his time on an annual basis making, negotiation and justifying partner remuneration decisions.

Politics is inevitable, but firms that effectively balance collective, individual and directed power have a huge competitive advantage.

#2 Collaboration

Recent Harvard Business School research has revealed that when different practice teams are able to collaborate around client needs, there is a massive positive financial impact. In one case study, the average annual revenue per client increased from US$150,000 to US$800,000 by having seven practice groups offering an integrated solution versus cross-selling seven discrete services.

Those firms that have transitioned from a “my client” to “our client” culture usually outperform those where partner autonomy reigns supreme.

#3 Consistent high standards

I recently chaired a panel discussion with three senior buyers of professional services. One of the questions put to the panel was whether there was a difference between top performing firms and the rest? Consistency was the universal response. Top firms were characterised by extremely high technical and service standards delivered consistently by everyone. In other firms they felt it was a bit hit and miss.

There is much evidence to support the proposition that successful firms are those that have cultures that are intolerant of mediocrity and expect and get high standards from everyone.

#4 Discretionary effort

Organisation cultures that are perceived to be genuinely caring, trusting and fair tend to get the best out of people. Staff are more likely to go the extra mile, to act above and beyond the call of duty, or just do that little bit more. Toxic cultures often result in lower productivity, higher absenteeism and substandard output.

#5 Continuity

In their bestselling book, The Service Profit Chain, Heskett, Sasser & Hart referred to research that showed that client satisfaction increased significantly with staff continuity. In situations where a financial services client had five different relationship managers over a two-year period only 40% clients were satisfied or very satisfied. This jumped to over 80% where there had been only one relationship manager. Continuity builds understanding of the client and fosters deeper relationships. These factors are critical in client choice, loyalty and advocacy.

Positive firm cultures facilitate retention and ensure continuity. A stable workforce also reduces the direct costs associated with staff churn.

#6 Alignment

Each of the three case study firms mentioned in the introduction to this blog post are characterised by a lean management structure. All leaders across the firm, but excluding the managing partner, still retain significant practices. In a way each team or cell within the firm has an ethos of self-sufficiency. They don’t see themselves as paralysed subordinates waiting for orders.

Alignment around firm direction, trust in leadership and a strong culture provides the glue that prevents anarchy but at the same time allows individuals and teams to be empowered. Self-management results in a significantly lower investment in planning, control and oversight and therefore more time on winning business and delivering work profitably.

#7 Busyness

In most professional services, busyness begets busyness. There is much evidence to support the notion that smart, highly motivated professionals seek to master their craft by doing good work for good clients. ‘Bring it on’ most say. In my experience the assumption that better work-life balance creates more staff engagement only applies to a minority. Consequently, one can conclude that a positive productive work culture creates more capacity to do even more work (within limits of course).

#8 Agility

If your firm is changing slower than the competitive environment around it, you’re going backwards! Firms with strong market and client-oriented cultures are really good at two things: [1] sensing and predicting trends, and [2] willing and able to make the necessary changes to adapt to different conditions. Agility and adaptability are cultural elements that are the hallmarks of successful firms in turbulent times.

#9 Fire in the belly

Business development is both a relationship game and a numbers game. Without some personal connection it’s very hard for a prospective client to develop enough trust to say yes. Equally, there will be fewer sales opportunities if you don’t show up. In tough times, there is usually a reward for those professionals with some fire in the belly and show up more often than others. The hunger to win is more intense and bears fruit in fuller pipelines and better strike rates.

#10 Execution

The last cultural element is related to all the others but is worthy of a mention on its own. It relates to the efficiency and effectiveness of implementing strategic decisions. It’s the ability to make it happen, to have the discipline and fortitude to overcome obstacles and to follow though on agreed actions. It seems so obvious, but so many firms struggle with this ‘simple’ ability to execute.

In conclusion

It is common for professional service firms describe their cultures as “collegiate”, “respectful” and “friendly”. In these tough times I don’t think just being nice is going to make a difference, to generate real value. Thinking beyond nice is incumbent of every professional service leader. Striving for true cultural differentiation will allow you to have culture for breakfast, strategy for lunch and champagne over dinner…

Photo source: http://nespresso.com

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